To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

Monday, February 27, 2006

Inequality and Work Hours

Stumbling and Mumbling cites a paper by Samuel Bowles and Yong-Jin Park showing a high correlation between working hours and inequality. They suggest the reason can be found in Veblen: the greater the degree of inequality, the more incentive the have-nots have to emulate the consumption of the haves.

But as I suggested in the comments, the association between inequality and work hours might also be explained by the backward-bending labor supply curve. Unlike other goods, the supply of which will increase indefinitely as the price increases, labor carries an inherent disutility. The laborer may increase his work hours to a certain point in response to increased pay, until he reaches what he regards as an ideal standard of living; after that, he may instead see further pay increases as reducing the number of hours he has to drag himself into his job to maintain that standard of living. In societies with high income disparity, the majority work longer hours because they have to. On the other hand, an increase in hourly pay might simply mean fewer hours have to be worked to produce the same standard of living. If cheap credit for starting up self-employment ventures were available, and the interest rates on mortgages and credit card debt were lower, considerably more people might be cutting back their work hours to part-time or retiring early.

There are reams of quotes available from the employing classes of Britain during the enclosures (see here for some of them), arguing that laborers couldn't be forced to work hard enough unless they were made destitute. When laborers had independent access to the means of subsistence, they worked at wage labor only seasonally, for supplemental income; they could afford to rely on subsistence farming for long periods, and go back to working for a boss only when they felt like it.

2 Comments:

It's actually misleading to speak of "supplemental wage labour", because readers will most likely understand that in terms of going off to work on a separate cash job. It could equally involve raising cash crops as well as subsistence ones, and/or doing work at home on a contract basis under the "putting out" system that predated separate factories as workplaces.

That idea of a reversing slope is one of the first steps I followed to my present understanding. First of all, I should mention that I have a mathematical background, and secondly that I did not merely read up on things but worked them out separately, then cross checked them to other people's work.

In this case, I spotted the paradoxical co-existence of the over- and under-worked, leading to unemployment as well as overwork. To me this suggested a phase change, which means some underlying curve has reversed its normal slope, so I went looking for a mechanism that could do that.

I found a candidate mechanism in the form of the Tragedy of the Commons, and my cross-checking researches then told me about externalities (but you can get one without the other, sometimes, and they don't always arise from a state-rigged stuff though that's the way to bet).

Anyway, when I chased that up I found a link between taxation and social security, together with a fix. My cross-checking showed me that Professor Kim Swales of the University of Strathclyde had come to the same conclusion by a different path.

Other strange byways led to other places, including the pattern of development in developing countries, but I won't go any further just here. You can read up on some of this, particularly the unemployment area that I first thought through, at my publications page.

Well it seems to me there are all kinds reasons people work long hours even though they'd rather not. Some because they need the money of course (it would explain why anyone would have multiple jobs) and some because even though they may not need the additional money they fear losing their jobs or other benefits if they work less.

The only reason many people work, and the full time work week, stops at 40 hours is because of business policies and social convention that ultimately derive from overtime laws and the labor movements that established them (although unions alone even without laws could probably do the same thing).

The economics is probably such that companies would rather have a single 8 hour (or 10 hour) worker than two 4 or 5 hour workers. I'd attribute this to certain costs that are fixed per worker rather than varying by the number of hours worked (benefits, sometimes work materials, possibly some taxation?, etc).

However overtime laws give companies a disincentive to work people more than 40 hours by mandating overtime pay etc.. These are losing strength though and are somewhat undermined by the whole "salaried employee" issue, whereby a company can work you as many hours as they want without paying you time much less overtime and some do.

However, because of laws and labor movements and the social conventions growing up around them a 40 hour week is still considered the minimum amount to work to be considered full-time (it was intended as a maximum).

And employees have strong incentives to be at least full-time: for the benefits if they exist (Medical is a big one. Part time employees are much less likely to have this) and because many jobs have almost exclusively full-time slots (ironically it's often the better paying better jobs that are exclusively full time - so the poor work multiple jobs to make ends meet and the better off work long hours to keep the "good" jobs they have). Then the same employees may, especially if they lack overtime protection, be pressured to give even more hours by the threat of losing their jobs if they don't.